Noodlemakers urged to stop giving gifts and discounts

Noodlemakers urged to stop giving gifts and discounts

Tony Hotland, Jakarta

The Indonesian Food Industry Association (Aspipin) has urged all
producers of instant noodles in the country to stop giving free
gifts and discounts starting July 1 "to restore healthy
competition" in the industry.

Aspipin chairman Bachtiar Yusuf explained on Tuesday that the
frequent provision of discounts and free gifts had forced several
producers to stop business because they were unable to compete
with other producers who were able to sell their noodles at lower
prices and give prizes at the same time.

"This isn't conducive for new investment and the creation of
jobs. Furthermore, the producers have forgotten to produce better
quality noodles because they're more occupied with how to sell
their products as cheaply as possible," said Bachtiar.

He said competition in the sector was not healthy anymore
because many producers had been selling their products at a much
lower profit margin.

"For a healthy industry, the profit margin should be at least
30 percent. Now, many producers are operating with profit margins
way under 20 percent," he said.

He cited an example of the significant increases in many
ingredients over the years, which apparently had not resulted in
an increase in the prices of noodles.

"This means that those producers have been subsidizing the
prices to keep them low for the public, but most importantly just
to survive in the sector," he said.

Bachtiar claimed that all members of Aspipin that produce
noodles including the giant PT Indofood Sukses Makmur had agreed
to the proposal.

"Although Indofood is not a member yet, it has agreed to our
proposal. Indofood is an important key player since it dominates
the market with a more than 80 percent market share," he said.

He suggested that companies, which have allocated a certain
amount from their budget to offer free gifts and discounts, use
the funds to improve the quality of the noodles and to initiate
more innovations.

"It's expected that in the future noodles can also be a
substitute for a meal, not only a snack. Noodles should be able
to meet the required calories," he said.

Furthermore, Bachtiar said Aspipin had proposed to the
producers to apply a minimum price for noodles, which would
likely be higher than the current one, to attract new investment
in the sector.

A pack of instant noodles now costs between Rp 600 (0.7 US
cent) to Rp 1,000. The country's total output of instant noodles
is about 12 billion packets per year, produced by some 18
companies.